Thursday, Nov. 19
Written 10:30 a.m. EDT
HITTING A NEW LOW: Mortgage rates hit their lowest levels since Bankrate started conducting its weekly survey in 1985. I don't know why rates dropped, although I will speculate. Part of the reason, I believe, is lack of demand. Even though mortgage rates are at their lowest in generations, few people are filing applications for home loans. Loan applications haven't been this paltry since December 1997, according to the Mortgage Bankers Association.
So, in my simplistic supply-and-demand worldview, low demand for mortgages results in lower mortgage rates.
Normally, the flipside of this supply-demand argument would be a statement like this: With few mortgages available to be securitized, investors bid high prices on mortgage bonds, which reduces mortgage rates. But we're not in a normal market. The Federal Reserve is buying most mortgage-backed securities, and private investors are shunning them. I think the Fed could pay less for these securities if it wanted to, but if the Fed took that track, then mortgage rates would rise.
D4L 4-EVER: Fannie Mae decided a few weeks ago to allow delinquent homeowners to remain in their houses, but as renters and not owners. It's called the Deed for Lease program, or D4L if you want to be cool like a Fannie exec.
Under Deed for Lease, you give your house to Fannie. You sign away the title in a deed in lieu of foreclosure. But instead of moving into your in-laws' basement, you remain in the house and pay market-rate rent. In some places, that can save a lot of money each month, because rents are low (because so many houses are vacant).
Chris Thorman explains the process and the potential savings.